Shares shrivel as traders see higher rates under Powell; Turkish lira sinks

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  • European share indexes down, Wall St set for weaker open
  • Dollar holds close to 16-month positive aspects as charge bets rise
  • Turkish lira crashes greater than 10% to new file low
  • <a href=”http://tmsnrt.rs/2yaDPgn”>Graphic: Global asset efficiency</a>
  • <a href=”http://tmsnrt.rs/2egbfVh”>Graphic: World FX rates</a>

LONDON, Nov 23 (Reuters) – Stock markets fell and the greenback held close to a 16-month excessive on Tuesday as traders positioned for rate of interest hikes in 2022 after Federal Reserve Chairman Jerome Powell was nominated for a second time period.

The most dramatic strikes had been once more within the Turkish lira, which misplaced 11% of its worth, crashing to a file low of 12.8 lira per greenback as traders panicked after President Tayyip Erdogan defended current charge cuts and confirmed little concern for rising inflation. learn extra

Volatility within the Turkish foreign money surged to eight-month highs.

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Lira volatility
Lira volatility

In developed markets shares had been weaker throughout the board. Futures on Wall Street pointed to a second day of losses within the United States.

The EURO STOXX 50 (.STOXX50E) dropped 0.67%, off the lows of the day, whereas Britain’s FTSE 100 (.FTSE) shed 0.1% and Germany’s DAX (.GDAXI) 0.72%%.

MSCI’s gauge of Asia Pacific shares exterior Japan (.MIAPJ0000PUS) fell 0.43%, whereas Hong Kong’s Hang Seng Index (.HSI) slid 1%.

U.S. President Joe Biden on Monday tapped Powell to proceed as Fed chair, and Lael Brainard, the opposite prime candidate for the job, as vice chair. The news initially buoyed Wall Street shares, earlier than the market pulled again into the afternoon with the S&P 500 and Nasdaq Composite closing down from all-time highs.

The sense {that a} second time period under Powell may add to policymakers’ want to curb rising inflationary forces additionally despatched traders shopping for {dollars}.

The buck, measured towards a basket of currencies, rose to a brand new 16-month excessive and pushed the euro additional beneath $1.13 to $1.1226, the weakest degree for the only foreign money since July 2020. At 1215 GMT the euro was off these lows.

“On the one hand, U.S. President Joe Biden’s decision to confirm Jerome Powell as Fed chair is generally seen as more positive for the greenback as Mr. Powell is considered less dovish than Lael Brainard,” mentioned UniCredit strategists.

“On the other hand, the fact that current COVID-19 developments are primarily affecting the eurozone represent another drag on the common currency.”

U.S. Treasury yields had been led higher by two-year notes, which usually transfer in line with rate of interest expectations. Those yields hit their highest degree since early March 2020 at 0.687% earlier than dipping again.

Steen Jakobsen, Chief Investment Officer at Saxo Bank, mentioned “the selloff in Treasuries amplified when Fed Atlanta President Bostic called for fast tapering that would give the option to hike interest rates earlier if needed, confirming a hawkish tilt within FOMC (Federal Open Market Committee) members.

“Interest charge hike expectations superior with the market now pricing nearly three hikes into 2022,” he added.

Market expectations for a first European Central Bank rate rise were brought forward to December 2022. read more

COVID CONCERNS

Adding to the gloomy mood were new concerns about the spread of COVID-19. Riskier assets have been shaken in recent sessions by surging COVID-19 cases in Europe and renewed curbs, dousing investor hopes of a quicker recovery in consumption and growth worldwide.

Germany’s outgoing Chancellor Angela Merkel said the latest surge is the worst experienced by the country so far, while Austria went into a new lockdown on Monday.

Euro zone purchasing managers index numbers for November showed business growth unexpectedly accelerating but that failed to lift sentiment. read more

In commodities, spot gold slid 0.45% to $1,796 an ounce. Gold prices were under pressure as Powell’s nomination drove expectations that the central bank will stay the course on tapering economic support.

Oil prices were in the red again after a short rebound the previous day from recent losses on reports that OPEC+ could adjust plans to raise oil production if large consuming countries release crude from their reserves or if the coronavirus pandemic dampens demand. read more

Brent crude weakened 0.95% at $78.94 a barrel and U.S. crude dropped 1.38% to $75.69 per barrel.

The U.S. Department of Energy is expected to announce a loan of oil from the Strategic Petroleum Reserve on Tuesday in coordination with other countries, Reuters reported earlier. read more

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Editing by Raissa Kasolowsky and Angus MacSwan

A man watches an electric board showing Nikkei index outside a brokerage at a business district in Tokyo, Japan, June 21, 2021.   REUTERS/Kim Kyung-Hoon

Traders are pictured at their desks in front of the DAX board at the stock exchange in Frankfurt, Germany June 12, 2015. REUTERS/Remote/Pawel Kopczynski

A man watches an electric board showing Nikkei index outside a brokerage at a business district in Tokyo, Japan, June 21, 2021.   REUTERS/Kim Kyung-Hoon

Lira volatility

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